SXC Health Solutions: A clean bill of health

The way SXC Health Solutions (Nasdaq:SXCI) sees it, even through current market malaise, the company is standing firm with its two corporate feet firmly planted in two complementary arenas: it's providing pharmacy benefits management services and developing the technology engine needed to keep costs under control.

Bringing down health-care costs remains a hot-button issue, as the baby boomers reach retirement age, Medicaid and Medicare grow, and drug costs continue to rise.

Pharmacy benefits management is one course of action to rein in costs, and one of growing importance: witness the CVS (NYSE:CVS) acquisition of PBM giant CaremarkRx in a $21 billion deal last year.

SXC Health Solutions, formerly known as Systems Xcellence, is a niche player in the benefits marketplace, with a market cap of $364 million. Headquartered outside Chicago, SXC Healthís stock has traded on Nasdaq since a 2006 public offering, and with Canadian operations, it's also listed on the Toronto Stock Exchange.

Niche players can be big players in this $4.5 billion market: SXC says one in four 1-in-4 U.S. managed-pharmacy benefit transactions last year touched its technology. Clients include unions, universities and businesses, along with federal, local, state or provincial governments. SXC says recurring contracts account for more than 80% of revenue. In 2007, transactions increased 30% to 404 million.

SXC Health's share price has risen 11.6% in the past three months. Analysts generally have a favorable opinion about the performance going forward: of the 16 analysts polled by Thomson Reuters, three rate it a "strong buy," six call it a "buy," . . .

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